Wednesday, May 4, 2011

Farmers Stressed, Food Prices Rise, Food Shortages to Come

also from Zero Hedge:

CEO of largest hog producer in the U.S. said this today:

"There are record prices for livestock but farmers are exiting the business!" he exclaims. "Why? Farmers know they won't make money."
We are just one bad weather event away from potentially $10 corn, which once again is another 50% increase in the input cost to our live production."
Mr. Pope recalls what happened the last time there was a surge in corn prices, in 2008: "The largest chicken processor in the United States, Pilgrim's Pride, filed for bankruptcy." They "couldn't raise prices, so their cost of production went up dramatically." Could it happen again? "It darn well could!" Mr. Pope exclaims.


…Mr. Pope says the "losers" here "are the consumer, who's going to have to pay more for the product, and the livestock farmer who's going to have to buy high-priced grain that he can't afford because he's stretching his own lines of credit. The hog farmer . . . is in jeopardy of simply going out of business 'cause he doesn't have the cash liquidity to even pay for the corn to pay for the input to raise the hog. It's a dynamic that we can't sustain."

Closing comments from the author of the article that reported this:

So here’s a CEO, someone with actual business experience (not some moron academic who’s never run a business a day in his life) telling us the following:
  • Food prices are up a lot and going higher in the future.
  • Despite high food prices, farmers are quitting farming (lower supplies are coming).
  • Food companies will be going bankrupt (even lower supplies are coming).
In other words, we are rapidly heading into a food crisis. Food prices are NOT going to be coming down. And we’re going to be seeing food shortages in the US in the coming months.